By way of example, this article provides an analysis on the validity of a non-compete clause included in an employment contract signed by DocuSign "DS Electronic".

Practical illustration: Two years after his appointment, the Chief Financial Officer (“CFO”) of a major company resigns. The company reminds the latter of his non-compete obligations, but the CFO contests its validity, arguing the clause is unenforceable due to his contract being signed via DocuSign using a “DS Electronic” signature. The company seeks our advice on whether a non-compete clause included in an employment contract signed via DocuSign is valid and binding.

Under Swiss law, and the Swiss Code of Obligations ("CO"), an individual employment contract is not subject to any specific formal requirement and can therefore be validly signed by any electronic signature such as DocuSign. However, the CO may require certain provisions — included in said employment contract — to be concluded in a specific form.

This applies in particular to non-compete clauses, which are required to be in writing.

I. Formal requirements for a non-compete clause in an employment contract

1. Under Swiss law, the validity of a non-competition clause is subject to the following four formal cumulative conditions (art. 340 CO): The employee must have full civil rights, i.e. aged 18 years old at least and be capable of discernment.
2. The clause must be in writing and signed by the employee and, where applicable, by the employer.
3. The prohibition of competition is only valid if, during the employment relationship, the employee was to acquire of the employer's clientele or manufacturing or business secrets.
4. The knowledge of customers, business or manufacturing secrets’ use by the employee might cause appreciable prejudice to the employer, the possible occurrence of a damage being sufficient.

For the purposes of this article, only the written form requirement will be analyzed.

Contracts for which the law requires written form must be signed by all persons to whom it imposes obligations (art. 13 para. 1 CO). Therefore, the non-compete clause must be in writing and signed by the employee and, where applicable, by the employer if it imposes an obligation to the latter.

Even though the written form is not defined by law, the CO governs the signature’s requirements.

According to art. 14 CO, to be valid the signature must be handwritten by the person obliged.

However, Swiss law establishes two exceptions in which non handwritten signatures are legally considered equivalent to handwritten ones:

1. The mechanical signature, where such reproduction is customarily permitted (art. 14 para. 2 CO) (see infra Chapter I.a);
2. The "authenticated electronic signature" (art. 14 para. 2^bis CO; see infra Chapter I.b).

a. The mechanical signature: cases in which its use is accepted by custom (art. 14 para 2 CO):

The mechanical signature is a reproduction of the handwritten signature affixed to the deed by technical means (wet stamp, printing, photocopy, engraving, etc.).

The existence of such custom is a matter of fact. In this regard, art. 14 para. 2 CO illustrates this principle by referring, for instance, to the signing of securities issued in considerable numbers, such as bonds and shares. The recognition of custom has also been affirmed in the context of insurance policies, as provided by art. 11 LCA and supported by Federal Court Judgments (TF 6B_79/2007, of July 23, 2007, para. 3.2 and ATF 112 II 245, para. 1c). Similarly, a customary practice has been acknowledged in the case of prize announcements under art. 243 para. 1 CO.

By contrast, the existence of such a custom has been expressly rejected in certain contexts – most notably in relation to rent increases notified by means of the official form (art. 269d CO; ATF 138 III 401, para. 2.4.2). Moreover, the question remained unresolved in the case concerning a summons under art. 257d para. 1 CO, which pertains to the termination of a lease in the event the tenant – who is in arrears with payments of rent or accessory charges – fails to make the required payments within the deadline imposed by the landlord.

In any event, such custom appears not to exist for non-compete clauses in employment contracts.

b. The authenticated electronic signature (art. 14 para. 2^bis CO):

Under Swiss law, only an "authenticated electronic signature" – which is based on an authenticated certificate issued by a duly recognized certification service provider and time-stamped in accordance with legal requirements – is deemed equivalent to a handwritten (wet ink) signature.

While numerous providers offer electronic signature services on the market, only those officially recognized as qualified provider – listed by the Swiss Accreditation Service ("SAS") – may assert legal equivalence with handwritten signatures. Electronic signatures issued by other providers that are not officially recognized do not benefit from this special legal status – this includes DocuSign in its "DS Electronic" format. Consequently, provisions subjected to a written form requirement – such as a non-competition clause – are not considered validly executed when signed using DocuSign's "DS Electronic" signature.

II. Conclusions and recommendations

In conclusion, while an employment contract may be validly signed using DocuSign’s “DS Electronic” signature, any non-competition clause it contains will be unenforceable, as it does not meet the written form requirement. As a result, the employer would be unable to take successful legal action for breach of such a clause.

To ensure enforceability, if, for business reasons, the concerned employment contract must be signed remotely by DocuSign (or a similar non-qualified electronic signature), we recommend integrating an appendix to said employment contract — referencing or containing the non-compete clause — signed by the employee with a handwritten signature or an authenticated electronic signature (and by the employer, if said clause imposes obligations to the latter).

More generally, employers who rely on electronic signatures should ensure that all signatories use a qualified electronic signature issued by a provider accredited by the SAS.

III. International recognition

It is important to note that Switzerland has not concluded any agreements on the mutual recognition of electronic signatures with third countries or the EU.

As a result, qualified electronic signatures under foreign law might not be equivalent to ones under Swiss law, and vice versa. International companies must therefore ensure that signatures comply with the legal requirements of the country where the agreement will be enforced. Some SAS-accredited providers offer solutions that are also recognized abroad.

Should you have any questions about the topics covered in this article, do not hesitate to contact us. Our employment law teams in Geneva, Zurich and Lugano are at your disposal for any assistance you may require.